Borrow in your Superfund to acquire rental investment property

Borrowing in a self managed superannuation fund to acquire a rental property has been allowed since late 2007. Although there has been a recent amendment to the laws governing the ability of an SMSF to borrow the principle remains.

The key to using your superannuation balance as a deposit on a rental property includes:

  • Establishing a self managed superannuation fund (SMSF) with a trusted advisor whom appear to know and understand the issues,
  • Rolling over superannuation balances held in industry or retail funds into your newly created SMSF,
  • Creating the additional structure that needs to be in place to enable the SMSF to borrow and acquire a property,
  • Apply for a loan in the name of the SMSF,
  • Find a property

This is quite a simple process, however some of the areas are somewhat specialised and it is not recommended that you leave it to a novice.

The superannuation legislation and regulations governing what you can and can't acquire and in fact what you can do with it after you acquire it. Some of these include:

  • An SMSF cannot acquire assets from a member or a related party of a member unless it is business real property (commercial or industrial) or listed securities [therefore no residential property],
  • An SMSF can acquire residential property from an arm's-length party but may not lease it to a member or related party of a member,
  • An SMSF can lease business real property to a member or a related party of a member,
  • An SMSF can acquire units in a unit trust that acquires a property where the other unit holder (i.e. Mum and/or Dad) borrow to acquire all their units. [NOTE: Property in unit trust cannot be used as security],
  • An SMSF and an unrelated SMSF (i.e. friends or neighbours) can each acquire equal units in a unit trust and the unit trust may borrow to acquire a property [NOTE Each unrelated SMSF must own 50% or less of the units],
  • An SMSF can take out an insurance policy against a member for the value of any loan taken out to acquire a property,
  • This list is not exhaustive and there are many other laws that govern this area. See a competent advisor before undertaking any investing with a self managed superannuation fund.

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Beware of schemes promoting borrowing by an SMSF that although similar in appearance do not comply with the laws governing borrowing by SMSFs. Check to see if what you are being told is legal and complies with the laws.


Most of the banks and financial institutions will consider contributions in looking at an SMSFs ability to repay a loan. If they pass away the bank may need to sell the property. Take out a life insurance policy equal to the debt paid for by the SMSF.